At the close today our IB account is up 110% versus S&P 500 up 13%. It has been a fun run….
Both Schwab accounts are at record highs. 20 of 23 open covered call positions are profitable generating substantial net profit (starting the tracking system April 24). 10 of the positions are more profitable due to covered calls. We have been selling “in the money” or “at the money” calls which increase downside protection….but hurt performance if the stock prices run up (which they have). We anticipate higher volatility until the outcome of the Presidential election is finalized and a President is sworn in. If Trump loses and contests the results who knows what market volatility be.
Many investors who utilize options like to “trade” versus considering the positions to be mid/long term strategic investments. Our preference is to invest time picking a stock to sell covered calls against and maintain the strategy over an extended period of time. Five current open positions we have “worked” over previous 91 to 138 days are shown below. The black line represents the current profit from the position. The calls we used to “cover” the stock evolve depending on how the stock is performing. Some weeks we roll up or roll out or write a calendar spread. If the stock drops and we remain optimistic on the stock we might not write options for a couple of weeks waiting for a bounce back up. At the bottom of the DOCU example I have included a table that includes the trades.
We currently have seven covered call positions in our account. 6 of 7 positions are profitable.
Graphs below track the progression of the positions over time. BCRX is an interesting study. Stock price has fallen and generated substantial loss….but selling options with good premiums has resulted in a very profitable strategy. INMD shares were called away on the weekend.
STE is likely a stock you have never heard of…..but it has been a good stock for covered call writing. So far the position has generated $4,170 in profit. Not as sexy as AMAZ or FB but profit is profit. Company pays a dividend yielding about 1%. The position has earned a profit on both the stock and the options, a hard combination to find.
Very defensive roll down this morning on Sep 18 $3200’s to $3000. The trade has been profitable ($51,146 in 123 days). $3200 calls were down to $2.00 so they offered no protection against further drops in the stock. Might regret the decision tomorrow when they expire but I would rather protect the profits than hope for a rebound and watch further erosion of the profit.
On July 13 we opened our covered call position on INMD. We rolled the options up from Jul 17 $30 to Aug 21 $35 on July 17. On Aug 21 the options expired worthless. We didn’t open a new option position until Sep 3 after the stock moved up over $4. Based on market volatility we were conservative selling a Sep 18 $30 for $5.00.
We have generated $3,706 in profit on the stock and $770 in profit from the options.
We opened our CC strategy on BCRX on May 14. Despite the stock price dropping and creating a loss of $4,388 the overall position is making a profit as the options have generated a profit of $13,708. Ideally the stock will climb back over $4 heading into the Sep 18 expiration.
On 8/20 we established a new CC on NIO purchasing the stock at $13.80 and selling Aug 21 $14 calls. Stock has significantly moved up closing yesterday at $19.88. We are making a profit of $1,700 on the position so far….but the return would be higher had we not covered the position. So far we have done a calendar roll on 8/21 and a vertical roll on 8/26. Planning on a calendar roll today. Option premiums will be high on this volatile stock.
Baxter had a nice jump in stock price the last couple of days closing at over $86 yesterday. We were short Aug 28 $83 and $83.50 calls. Plans were to roll the options up and out (diagonal) today and hope the upward momentum continued. Stock goes Exdiv today with a dividend of $.245 which we intended to capture. Made a mistake not rolling up to “out of the money” strike price yesterday and lost the dividend ($367) as a result.
We may replace the position today. Baxter doesn’t have the volatility (lower return on covered calls) but it pays a solid dividend and is a good core healthcare holding.